Multi-factor funds: Opt for quant model-run fund to eliminate manager risk

Be mindful that these funds do not have a track record, and changing market conditions can render a model obsolete

While passively managed multi-factor funds that track a multi-factor index have been around for some time, now several fund houses are launching multi-factor funds that do not track an index. Instead, all portfolio-related decisions are based on a quant model. New fund offers of Sundaram Multi Factor Fund and Bandhan Multi Factor Fund hit the market recently. Mirae Asset Mutual Fund is reportedly planning a similar offering through the fund-of-funds route.

 

Single- vs Multi-Factor Strategies 

Single-factor index funds mimic indices based on a single factor, such as quality, momentum, or value. The problem with such strategies is that they can